The Emotions of Money — Concerned about the way younger family members handle their money? Here’s a fresh look at how to solve these common generational conflicts.

By Ilana Polyak
Illustration by Carl Wiens

As soon as the first of Jane Cate’s five grandchildren was born, she and her late husband opened a mutual fund account earmarked for their grandchildren’s college education. The couple, then living in New Jersey, knew that college was the best way for their family’s newest generation to succeed. “I just think education is so important,” says Cate, a Thrivent Financial for Lutherans member and retired elementary school teacher.

Cate was among the first women in her family to receive a higher education. Her own grandmother helped her with the cost, and Cate wanted to pass on that same gift to her own grandchildren. Through years of sacrifice and prudent investment, Cate and her late husband, also a teacher, were able to secure a comfortable nest egg while sending their three daughters to college. “We scrimped and saved with the idea that we would be sending our three girls to school,” the 69-year-old Florida resident says. “We never had a family vacation. We could rarely even afford to go to McDonald’s.”

Cate estimates that their mutual fund distributions pay for less than a quarter of total college costs for their grandchildren. This is no small feat. According to the College Board, annual tuition at a four-year private college today costs $21,235 on average and $5,491 at a state school, not including housing and other expenses, such as books, travel and health care. College costs rise about 6 percent a year, about twice the rate of inflation.

While all of Cate’s children and most of her grandchildren share her general attitudes toward money, not all of them do. After socking away money for so many years, it was disheartening to Cate when one of her grandchildren decided to quit college. Cate and her husband decided to hold back the funds they had earmarked for the grandchild. They both wished their grandchild valued higher education as much as they do.

Your Money, Your Values
Cate isn’t the only American retiree who feels this type of conflict. Differing financial priorities between generations seem to be one of the toughest issues for people ages 65-plus to negotiate.

Becky Lester, a Thrivent Financial for Lutherans financial consultant in Ormond Beach, Florida, a sunny outpost near Daytona Beach, sees plenty of these conflicts play out in her office. In fact, Cate is a client. Lester draws her clientele largely from the area’s pool of retirees. As she guides her clients in their planning, Lester often gets a taste of how her clients’ children and grandchildren view money as well.

A few years back, Lester met with a retiree who was supporting a middle-aged son going through a divorce, a tragic situation that is often a “black hole” even for those governed by strict financial prudence. “My client was using her IRA to help out her son,” Lester says.

Making the situation worse: The son was unemployed and not aggressively seeking employment. Lester helped her client realize that if the pattern continued, she would be putting everyone’s financial security in jeopardy, including her own. “I think sometimes parents think it’s a duty to bail out their kids no matter what,” Lester says. “It’s not.”

It was a difficult conversation for Lester to have with her client. When does a hand up turn into a hand out? The right answer, after all, isn’t always clear. “There’s an enormous amount of emotion involved in cross-generational financial decisions,” Lester says. “Sometimes a financial professional can help people separate the emotion from the fiscal reality.”

When Aid Becomes Enabling
Parents rarely start out expecting to support their adult children. Yet over time, certain patterns can emerge. Adult children might encounter a patch of misfortune, such as a job loss, or make bad decisions that lead to crippling credit card debt. Many parents might let grown children fight through these setbacks on their own. But when grandchildren are involved, retirees often feel that there’s no other choice but to step in and write a check.

There’s nothing wrong with grandparents making generous gifts to their grandchildren, especially to fund their education. However, Lester cautions her clients against getting overly involved with their offspring’s financial commitments. “Then bail-outs can get to be a habit,” she says. “Some people don’t know what the cutoff should be.”

Generational Differences
Another client couple of Lester’s, two save-for-a-rainy-day types, are educators who have squirreled away a comfortable nest egg through a lifetime of disciplined saving and investing. Even their investments, mainly annuities, are risk averse.

Their son, however, was slightly more casual with his personal finances for a time. The son, who is now also a client of Lester’s, followed in his parents’ noble footsteps by becoming an educator. His wife is a teacher as well. Lester estimates that when she first started working with the couple, their combined income totaled about $100,000. Their mortgage, at $2,400 a month, was reasonable for their income bracket, but also left little room for error.

“An illness occurred, and then a job loss, and as a result, they both ended up out of work,” Lester says. “But now they had this $2,000-plus mortgage on their hands.” The son’s parents came to the rescue, and he and his wife were able to keep paying their mortgage uninterrupted until they were back on their own feet.

It was a happy ending to a potentially devastating financial story, but the situation underscores a fundamental generational difference in values.

For many younger Americans, it goes way beyond mortgage payments. Financing consumer debt, unfortunately, has become a way of life. “Too many young people are clearly living beyond their means, and parents shouldn’t enable them to do so,” Lester says. In addition, today many in the younger generation want now what their parents saved for or didn’t have until later in their lives.

Indeed, fueled in large part by more unchecked spending, according to the U.S. Commerce Department, the American savings rate fell to negative 0.5 percent, dipping into negative territory for only the third time in U.S. history. It’s a statistic that many retirees, who grew up with the mantra “a penny saved is a penny earned,” find alarming.

So how can you help the next generation learn the lessons you did? Oftentimes the answer is as simple as rewarding only their productive choices. Cate, the Florida woman who is helping her grandchildren with college, is very clear about the message she is sending her grandson. She is adamant that the money she’s saved on his behalf only be used for education. “I told him, ‘This isn’t for a car, it’s not for you to get an apartment.’” But she adds, the minute her grandson decides to go back to school in earnest, “I will pay for him to do that.”

Ilana Polyak is a New York City–based writer whose work has appeared in The New York Times and Money magazine.

Tough Talk — 5 helpful tips for discussing money with family members.

Many of us have no fear when it comes to talking with our family members about our shared genealogical history, or the upcoming reunion, or updates on Uncle Pete’s knee replacement surgery. But when it comes to money, our family banter often skids to an uncomfortable stop. It doesn’t have to be that way, says Scott Wisgerhof, manager of core needs and retirement planning services with Thrivent Financial for Lutherans. In his 10 years working with Thrivent Financial members and representatives, Wisgerhof has seen how the thorniest of family financial topics can be discussed openly and respectfully with enormous benefit to everyone involved. Here are a few of his suggestions.

1. Value your values. It’s never too late to have a positive influence on your children’s views regarding saving, sharing or spending. “Just because they’re grown with families of their own doesn’t mean the chance to teach them your financial values has passed,” says Wisgerhof. “Children never stop watching their parents. So let them see you writing a check to a church or charity, or buying a used car, or having a healthy discussion about how to best save for that anniversary trip with your spouse.”

2. Get advice before you give. When it comes to helping out your children and grandchildren financially, it’s always smart to consult your Thrivent Financial representative before you write the check—and even before you utter your intentions to anyone but your spouse. “It goes without saying that your heart is in the right place,” Wisgerhof says. “But a professional adviser can help you look at the long-term, and how your gift could affect both you and the recipient.”

3. Don’t lecture. You may have a terrific lesson to impart, but avoid starting conversations with “You don’t know how lucky you are…” Rather, share personal stories that illustrate and prepare them for challenging financial situations. Your 17-year-old granddaughter will get a kick out of hearing that you survived on mashed potatoes and owned two pairs of shoes during your first year in the workforce—and how you wouldn’t trade those early lean years for the world.

4. Watch for the warning signs. “If your children or grandchildren are dependent on you for anything other than their educations, you need to talk to your spouse to evaluate the course you are on,” Wisgerhof says. Red flags include loans turning into handouts, or when you’re sacrificing budgeted retirement income for other family members.  

5. Involve a professional.  When facing big money issues—downsizing to a smaller home, making decisions about insurance, concerns about funding your retirement—bring in someone who can objectively guide the discussion and help you make smart choices. “A Thrivent Financial representative is just a phone call away,” Wisgerhof says. “A lot of emotional upheaval can be avoided when families involve an objective, informed, experienced third party.” 

— Heidi Pearson